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Nicole Rennó Castro

Macroeconomics researcher at Cepea

cepea@usp.br

June 25, 2019

Labor productivity increases more in agribusiness than in Brazil and boosts sector GDP

The Brazilian agribusiness accounts for an important share of the national GDP: 24% from 1996 to 2018, on average. Although this share varies annually, a result of the compared dynamics of prices, productivity and volumes of capital and labor between agribusiness and other economic sectors, the number presented a significant downward trend from 2004 to 2014. According to data from Cepea, the ratio between agribusiness GDP and Brazilian GDP decreased 8.3 percentage points in the period, changing from 27.36% to 19.06%.

Agribusiness played an important role for the economy over the last decades, producing an increasing volume of food, fiber and energy at decreasing relative prices, reinforcing government goals to reduce poverty and generate foreign currency, according to Barros, 2016 (http://www.ipea.gov.br/portal/index.php?option=com_content&view=article&id=28219). Even with the expansion of the production, the success of the agribusiness had not reflected on its relative GDP (compared to the national GDP) – situation that, according to Barros (2016), would only be possible with important advances in productivity and international demand, scenario that would limit more significant price drops.

Considering the fundamental role of agribusiness productivity growth, this text analyzes the behavior of this variable between 2004 and 2015. The agribusiness labor productivity[1] was calculated. Variations in labor productivity reflect differences between real GDP growth (refers to the change in GDP volume level) and the growth of total hours worked by the people employed in each sector of analysis.

As for the GDP, according to Cepea data, the agribusiness accumulated real increase (in terms of volume) of 21.4% between 2004 and 2015 (an average annual rate of 1.8%). The growth was influenced by the primary segment (agriculture + livestock) GDP, which upped 3.7% per year. For inputs, agro-services and agroindustry segments, average annual growth rates were less significant: 2%, 1.4% and 0.8%, respectively – lower than the national average, of 3.1%, according to IBGE.

In the same period, the total hours worked in the agribusiness decreased sharply. The number of people employed dropped 13.3% for agribusiness (-1.3% annually); among segments, there had been stability for inputs, increase for agro-services (17.4% or 1.5% per year), reduction in the agroindustry (-3.5% or 0.3% annually) and a sharp decrease for the primary segment (-26.4% or -2.8% annually). In the same period, for Brazil as a whole, the number of people employed increased 1.1% annually. The average working time in the agribusiness has also decreased, 4.8% in the accumulated of the period, reinforcing the decrease of the total hours worked in the agribusiness.

As a result, the labor productivity in the agribusiness increased at higher annual rates compared to Brazil in almost every year between 2004 and 2015, except 2012 and 2014, with the accumulated increase surpassing in 16 percentage points that of the productivity for the economy as a whole. For the agribusiness, the productivity increase was 46.9% (3.5% annually), and, for Brazil, 31% (2.5% per year). As for segments, the labor productivity soared 122% (7.2% annually) for the primary, and rose 4% for agro-services and 21% for agroindustry.

With these results, it is possible to decompose the average annual increase of the GDP of sectors analyzed into variations of labor productivity of the employed population and the size of the employed population itself. Then, it is possible to decompose the variation of labor productivity of the employed population into the productivity per hour worked and average working time.

From 2004 to 2015, the increase of the agribusiness GDP was related to advances of the productivity per hour worked in the sector. As expected, this behavior is even more significantly observed for agriculture and livestock. On the other hand, for agro-services, the increase of the GDP followed the increase in the employed population. As for Brazil as a whole, the productivity increase also explains a relevant part of the GDP growth in the period.

Therefore, the labor productivity increase played a fundamental role in agribusiness GDP growth, a result mainly influenced by the behavior of agriculture and livestock. In other words, GDP has increased significantly at the same time that the number of people employed has decreased sharply.

On one hand, this result highlights the success of a production model for agriculture and livestock based on innovations, with investments in technology and human capital and intensive use of increasingly modern inputs. This process puts agribusiness on the spot in the Brazilian economy, with relevant contributions to GDP and international trades. On the other hand, there are negative social results of this process, which ends up intensifying the production, excluding several small enterprises and substituting capital for labor – with effects on the labor market that must be considered by policy makers, mainly because they affect vulnerable groups of society.

[1] Regarding hours worked, data from PNAD/IBGE and RAIS/MTE were used by Cepea. The Brazilian GDP was obtained at SCN/IBGE and the agribusiness GDP was obtained at Cepea/CNA. Input-output matrix information released by Guilhoto and Sesso Filho (2005) and Guilhoto and Sesso Filho (2010) were complementarily used.